Susan Collins, President of the Boston Federal Reserve, stated that the benchmark interest rate should be maintained at its current level for the time being. As expectations for a rate cut grow ahead of Kevin Warsh's upcoming appointment as the new chair of the Federal Reserve, there is increasing support within the Fed for keeping rates steady. Some officials have not ruled out the possibility of further rate hikes.
According to a speech released before an event at the Boston Economic Club on May 13, Collins noted, "With inflation exceeding target levels for over five years, patience is wearing thin regarding temporary factors that could lead to another supply shock."
Collins predicted that even if the conflict in the Middle East is resolved relatively soon, inflation is likely to decline only marginally this year. He emphasized, "It is important to maintain the current somewhat restrictive monetary policy stance for a while longer."
Collins' remarks contrast with the market's growing expectations for a rate cut following Warsh's appointment. Market analysts believe that President Donald Trump’s public criticism of Jerome Powell, the current chair, has increased pressure for a rate cut, and that expectations for a shift in monetary policy may rise once Warsh takes office.
However, the Fed's internal assessment differs. In a prolonged high-inflation environment, concerns are growing that if supply shocks from the Middle East conflict continue, maintaining a steady rate may be more necessary than an early cut.
Internal disagreements were evident during last month’s Federal Open Market Committee (FOMC) meeting, where three voting members opposed the possibility of a rate cut as the next policy direction. Collins also expressed agreement with these dissenting views in an interview with Bloomberg last week.
In his speech, Collins left the door open for the possibility of additional rate hikes. He stated, "While it is not the most likely scenario, we should consider that some policy tightening may be necessary to bring inflation back to 2% in a timely manner."
* This article has been translated by AI.
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